IFRS 18 to include new category of income, expenses disclosure
- Manuel Guilius Pamorca
- Apr 9
- 3 min read
"Investors tell us that MPMs can be a good thing, but their use needs more discipline and transparency." — Hans Hoogervorst, former chairman, International Accounting Standards Board
IN boardrooms and briefing calls, it's common to hear executives highlight their "adjusted profit" or "core earnings," often to separate one-off items from recurring operations.
But until recently, these figures existed in a gray zone — outside the audited financial statements, prone to varying definitions, and difficult for investors to reconcile.
With the introduction of International Financial Reporting Standards (IFRS) 18, things are about to change.
Effective 2027, IFRS 18 will include Management-Defined Performance Measures (MPMs) as a formal category of disclosure. For Philippine companies, this shift in performance communication will bring transparency opportunities and compliance challenges.
In context, MPMs are subtotals of income and expenses that management uses in public communications to depict performance. For example, metrics like "adjusted operating profit" are used to show performance without volatile or unusual items.
Under IFRS 18, a company presenting such a measure in press releases, investor calls, or any public forum, must disclose that same measure within the financial statements.
For a measure to be considered an MPM under IFRS 18, it must meet four key criteria: It should represent a subtotal of income and expenses; embody management's view of the company's financial performance; be publicly communicated; and not be one of the subtotals already defined by IFRS, such as revenue or gross profit.
This distinction filters out generic figures, focusing on the tailored metrics that management emphasizes publicly.
MPMs must be presented in a single, clearly labeled note in the financial statements. The note accompanying an MPM should clearly describe why management uses the measure, how it's calculated, and how it differs from the nearest IFRS-defined figure.
This includes adjustments, tax effects and non-controlling interest impacts. If the calculation changes from previous years, companies must explain why and restate comparatives where necessary. These requirements ensure investors understand the reasoning.
While publicly listed companies often report adjusted figures in press releases, IFRS 18 brings these disclosures into the audited realm. This means that any metric that qualifies as an MPM will require careful documentation and audit trail.
Complexity, cost
But transparency has a price. With MPMs now included in audited financials, the bar for documentation and accuracy rises sharply. Finance teams must establish a solid audit trail, and auditors must scrutinize these measures with the same rigor applied to statutory figures.
This adds complexity and cost, especially for companies with multiple or evolving performance metrics.
Auditors will also face a heavier workload. MPMs now fall under audit scope, requiring validation of calculations and rationale. Auditors must assess mathematical correctness and contextual sense — like, for instance, whether excluded items are truly non-recurring, or if the metric's use is consistent.
This requires tighter coordination between teams (IR, accounting, auditors) and robust documentation.
Furthermore, IFRS 18 aims to enhance transparency from the uncertainty around defining "management's view" and "public communication." These gray areas need professional judgment; regulators might also need to provide guidance for consistency and investor trust.
IFRS 18 marks a defining step on how companies communicate performance — no longer leaving key figures in the shadows, but subjecting them to the same scrutiny as the rest of the financial statements.
For CPAs in public practice, this is a pivotal opportunity to help companies bring structure and clarity to the performance story they tell.
By formalizing MPM presentation, IFRS 18 aligns investor messaging with financial reporting, bringing management's story into the audited financials for a more complete picture. IFRS 18 doesn't stop companies from using their own metrics; it just requires them to be clear, consistent and auditable.
By supporting clients in navigating MPM disclosures, accountants can ensure that what gets reported is not just compliant, but meaningful. The goal is not to merely eliminate adjusted or customized metrics, but to sharpen their reliability and relevance.
This is where the role of the accounting professional becomes more than just a technical function — it becomes a force for clarity and accountability in capital markets. With discipline and transparency, this move from subjective interpretations to clear reporting builds investor trust and advances the profession.
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Manuel Guilius A. Pamorca is a member of the Association of Certified Public Accountants in Public Practice (Acpapp) Media Affairs and a technical accounting senior supervisor at Scrubbed.net Global Services.
